Cloud formation

Back before the dot-com bubble burst, the global private equity firm Warburg Pincus invested in two start-up technology companies that a decade later would come to shape the way global trade is managed and financed.
Those two companies, in a way, came full circle in early January, when the software-as-a-service supply chain vendors GT Nexus and TradeCard announced a merger agreement.
Though Warburg Pincus has since divested itself of its stake in GT Nexus, it still is the majority owner of TradeCard, by all accounts the leading trade finance platform. That the embryonic stages of the two companies coincided is but one link. The other is that both emerged as cloud-based leaders in their respective supply chain categories.
The merger pairs two companies with somewhat similar product offerings, but distinctly different strengths. Oakland-based GT Nexus’ strength lies in visibility and logistics spend management, while New York-based TradeCard’s strengths are in order-to-cash and procure-to-pay cycles.
Both companies provide some products in the other’s area of strength, but the merger could allow both to leverage the power of expanded networks, not to mention overhead, and investment resources.
TradeCard Chief Executive Officer Sean Feeney will be CEO of the merged company, which will be based in Oakland, while GT Nexus CEO Aaron Sasson will become chairman. TradeCard founder Kurt Cavano will be vice chairman. Specifics about the company name and leadership structure will be announced when the transaction is finalized, the companies said.
Analysts lauded the merger, saying it will create a compelling offering — two like-minded companies with cloud-based architecture focused on networks that amplify growth. But beyond those paeans to connectedness, the joining of GT Nexus’ capabilities with those of TradeCard could indeed be unique.
“Think of the scope of all the things you can electronically integrate in one place,” said Ed Sands, global practice leader of logistics at Procurian. “Packing list, commercial invoice, purchase order, 10+2, in-transit events. Carton-level tracking. Receipt at destination. Number of units received versus number of units shipped. Placement of purchase order through finance, (letter of credit) path, (distribution center) receipt, settlement to the carrier, settlement to the buyer, receipt of goods. All that’s in one place. That makes them a much more compelling story as a provider.”
Indeed, Sands struggled to come up with another provider that would be able to link the strengths of TradeCard on the buyer-seller side with those of GT Nexus on the buyer-carrier side, outside of a licensed on-premise vendor like Oracle, or multiple point solutions.
“Now you have a complete buyer-seller, logistics supply chain end-to-end platform,” he said.
In conversations with the two companies, it was clear that both saw a merger as the next evolution for their growing businesses. Both dabbled in the service areas of their counterpart. In GT Nexus’ case, the Oakland-based company introduced trade finance applications as far back as 2007, but found it difficult to grow that side of the business as quickly as its supply chain visibility business.
Rumors persisted over the past year that privately-held GT Nexus was eyeing a public offering, and Sands speculated that investors may have wanted to see the company develop a more comprehensive suite before going public. He said the joint potential of GT Nexus and TradeCard could well accomplish that.
Both companies bring huge rosters of customers and network partners to the merger, with TradeCard deeply ingrained in retail supply chains (particularly those based out of the Asia-Pacific region) and GT Nexus boasting customers across several shipper verticals, as well as vast number of major 3PLs and ocean carriers.
GT Nexus gained prominence in the mid-2000s as one of the primary ocean carrier booking portals, but the company has always stressed it is about much more than that. Its visibility functions are highly-regarded by shippers and analysts alike.
“Their strength comes from the financial supply chain, and ours from the physical supply chain,” GT Nexus spokesman Greg Kefer told American Shipper. “It’s important that these things be linked. Events between the two processes are related. When you’re paying suppliers, those payments are triggered by things that happen in the physical supply chain.”
Both companies, Kefer said, aspire to create a unified view of the supply chain among partners — a single version of the truth, as he put it — so that changing the status of an order is like changing a phone number on LinkedIn. The change only needs to be made once, and each partner has access to the change.
The companies had been internally discussing a merger over the past few months. If the merger passes regulatory hurdles, it would close in the first quarter of 2013, with development of an integration roadmap the first priority.
Combined, the companies estimate they would have a network of 20,000 businesses (roughly 10,000 from each side) and handle $100 billion in direct supply chain trade.
Mauricio Barberi, senior vice president of global marketing for TradeCard, said the companies had been on a sort of collision course in recent years and that the merger was driven by feedback from overlapping customers, and from analysts that suggested such a complementary offering would be unique and beneficial to customers.
“The feedback from customers was ‘What took you so long?’” he said. “We have a handful of joint customers who told us, ‘When are you going to get together? You guys are like gears that would mesh well.’”
He said a mutual customer engaged in a joint project where the two companies’ services were successfully aligned became a “proof point” for a broader partnership.
Barberi stressed the strong geographical footprint the aligned organization will have. Both are strong in North America, where they are both headquartered, while GT Nexus has a significant presence in Europe and TradeCard has made huge inroads in the Asia-Pacific region.
The product roadmap will wait until the merger gets regulatory clearance.
“Conceptually, we’re going to look at our capabilities, the products that are mature, and well-received, and make those decisions about where we want to invest in the future, filling some of the white spaces between our services to have the most complete solution,” Barberi said.